Universal fixing to start a music subscription service?

Universal has made its problems with iTunes well known in the past, and it now looks like it might be set to take things to the next level, with BusinessWeek reporting that the company is trying to enlist the support of other record labels in order to launch their own music subscription service. Apparently, Sony BMG Music has already expressed interest in being a "potential partner," and Universal is now trying to convince Warner Music Group to come on board as well. What's more, it seems that this potential service, currently dubbed "Total Music," would be quite a bit different than your usual subscription model, with the groups' current thinking apparently focused on a $5-per-month subscription fee that hardware makers or cell carriers would absorb, making the music itself "essentially free" for consumers. That, of course, would still add up in one form or another, with some "industry insiders" speculating that it could add as much as $90 to each player -- based on the assumption that users hang on to their players for 18 months on average.

[Via Yahoo News/IDGNS]

[jim @ Oct 12th 2007 12:00PM]

Who cares. 5 years from now, musicians won't need record labels anyway. They will just upload their songs to iTunes and they will get the 70 cents rather than the label.

[cris @ Oct 12th 2007 12:07PM]

apple fanboy just can't stop mantioning iTunes?

yea, they will upload musics, to their own websites.

[jim @ Oct 12th 2007 12:11PM]

I wonder if you'll ever get to have conversations on tech sites where people don't take personal attacks at one another.

[icfleming @ Oct 12th 2007 12:45PM]

But how would you hear about the artist or the song? The mythical marketing fairy? I can't wait until everybody with guitar can upload their latest song about bong hits that sounds so awesome at 5 AM after bars closed.

Itunes changed distribution but hasn't changed anything in regards to making and marketing music.

[Carlos @ Oct 12th 2007 1:35PM]

You really think Apple would give 70 cents to the artist? Why do you think the artist would ever get that larger of a cut from music sales?

I think people have a misconception of what the music business is. the Artist is only 1 part of the whole equation, unless your selling CDs out of a van a whole lot of people work on releasing an album - producers, lawyers, PR, marketing, physical disc production, delivery logistics etc

Think of it as a the movie industry, the musical artist is similar to the director or star of the film, but there a whole lot of other parts to producing a film and everyone involved gets a cut of the sale of a movie.

artist need the marketing/PR push to become famous it doesn't just happen - RadioHead can pull stunts like giving their CD away because they already have a fan base that was built up the traditional way through music labels. If anything they are screwing all up and comers making them think they will get somewhere by giving their stuff away.

[TimB @ Oct 12th 2007 2:35PM]

@Carlos - I think people have a *very* good idea of how the music business works: The artists produce content, the end-user consumes it for a price. All the other moving parts are unnecessary middle-men who take money from both ends of the chain. There are plenty of ways for new artists to get "airtime" (peer review), etc. Look at what Netflix has done with some pretty sophisticated marketing algorithms (if you liked movie "X", then we recommend...) Whether it's Apple, Amazon, whomever -- the traditional music business has been dying a long slow death. Someone please step up and finish them off.

[Carlos @ Oct 12th 2007 3:54PM]

TimB - some middle men may not be necessary but the bulk of them are... we are already seeing something similar with podcast. There are hundreds of thousands of podcast out there but no way to sift through them all in a way that I am going to find the podcast that interest just me. A lot of it is junk and I have no time to sift through and 'discover' the podcast that I want to watch or listen to.

Also, most of it is low budget material with no production vaule, under your assumption of how the future of music will work we will have an endless sea of armature music that gets sorted and served up to us by an algorithm - FUN!

The Artist cant produce and sell QUALITY recordings to the end user - a lot of stuff happens in between - believe me even Radio Head is paying a shit load of money to their own 'middle men' that worked on that *free* album of theirs, I bet you anything PR, Marketing, web developers, web commerce, lawyers, producers etc were paid up front by Radio Head in order for them to get that album out to the people. AND the only reason it works is becuase they already have the FAN BASE that was built up the traditional way.

[J. Western @ Oct 12th 2007 12:06PM]

Donald you must be a Canadian closet Texan...When are you fixing to come down and visit?

[EEaudio08 @ Oct 13th 2007 3:10AM]

haha, i was thinking the exact same thing. Texans are the only ones who are fixin' to do anything

[unreal mccoy @ Oct 12th 2007 1:40PM]

I thought the same thing.

Really 'preciate the use of Texan Donald.

[John Doe @ Oct 12th 2007 2:10PM]

Ditto. But I thought it was fix'n. I get this is the high class southern version. :-P

[Carlos @ Oct 12th 2007 1:18PM]

No way this business model will work - first off people will not want to pay the additional $90 upfront when they buy their media player, and what then free music for the life of that player, no way that will happen - secondly the record labels would never walk away from the ability to keep charging those customers month after month as they do now with subscription services.

[Vanillacide @ Oct 12th 2007 12:12PM]

Universal, listen ... I will never subscribe to a music service, and I think many people feel the same way.

I know you want a predictable, subscription revenue stream (don't well all?), that also (handily) breaks the link between artist and sale. But ... firstly, if I can't pay you one month, I'll lose access to all my tunes; secondly, sounds like another way not to pay the artists/songwriters/producers/talent their due.

[roc ingersol @ Oct 12th 2007 12:13PM]

That's why they're trying to end-run around the musicians and lock in exclusive long-term deals with the makers of client-facing services and products.

If Universal starts getting $x per month per user from Microsoft, what do they care if more and more artists go elsewhere? As their costs of doing business drop, their profits would only increase.

At some point the service and product makers might wise up and stop paying Universal at all - but that's going to happen anyway. Better to rake in the largest possible pile of undeserved cash in the meantime.

Next, I'd expect the major labels to spin off their A/R and marketing groups. That way they can continue to leverage their properties and staff to make money off 'independent' artists. As their stranglehold on physical distribution loses value as an asset, they'll restructure that division and finally just let it die.

[why not the LS2/LS7? @ Oct 12th 2007 12:12PM]

This will double the price of a Shuffle-style device, and add 40 to 50% to the price of a larger NAND jukebox (like iPod Nano).

This makes no sense.

It really does mirror what Universal was (seemingly) saying to Apple all along, that Universal wants a cut of each player sold. This would allow them to do it, a "guaranteed revenue stream".

I see why Universal wants it. I cannot comprehend why a customer would want to pay for it.

A strong aspect of this business model is it will help Universal push artists back into the big label fold. Because any artist on a big label gets a (miniscule) cut of every music player sold, while if you go it alone, you get nothing AND you now have to figure out how to sell your music to customers to aren't used to paying for music tracks.

Very crafty Universal. A whole new business model. But not one that increases your business by responding better to the customer, but instead one that ensure you never have to worry about selling anything to the customer. Once the customer buys their player, Universal already made their money. If the customer never downloads a Universal track, Universal doesn't lose a dime, in fact they save on overhead.

[rp @ Oct 12th 2007 12:54PM]

I agree completely. Universal is looking for a way to make money regardless of if you buy their music or not. With this awesome new business model, I could never listen to a Universal track in my entire life and still have to pay the markup to them by buying a mp3 player. That's pretty ingenious, considering I don't listen to music from ANY major label (drum and bass isn't exactly the most popular genre). Unless they plan on having Apple, MS, or whoever create specific players that will be for use with Universal's service (iPod Nano Greedy Major Label Edition anyone?), then everyone will be paying. Man, I can't wait to pay for something that I will never use.

[shannon dees @ Oct 12th 2007 12:28PM]

Fixing to?

[Vanillacide @ Oct 12th 2007 1:18PM]

Price fixing to?

[Sam @ Oct 12th 2007 12:38PM]

This is a veritable ROFLCopter of a bad idea.
Seriously, does anyone at the record labels pay attention to what everyone is saying, or do they all live in some insulated bubble in the Arctic Circle?
I swear there is no industry that listens to its consumers less than the music industry.

[ppentz @ Oct 12th 2007 12:46PM]

Sorry Universal, you and your RIAA "buddies" blew it when you started suing your customers. I will never never never purchase a song from anything you are associated with. Music is a luxury, and I will get along without it before buying from you idiots, especially if Sony is involved (they'll want to load a rootkit on my PC). Besides, any offering you'd have will be loaded with DRM crap and cost $1000 per song if you could get away with it.

[Chicksta @ Oct 12th 2007 12:47PM]

This just seems bad for everyone. It's great that artists who have already established themselves via a large label can now sever those ties, a la NIN and Radiohead, but how many bands are out there now who have been doing that same thing for YEARS yet no one has ever heard of them (because they never had a label backing them up)? So instead of proving the value of the services that they provide (legal, marketing, management, admin, PR, distribution, shipping, printing, etc.) they try to provide LESS value and try to rip off the buying public by doing NOTHING. And then they want to create a full-force bully system by coercing the other labels into this. It seems that all of us just got screwed by Microsoft, since they're the ones who put the blood in the shark tanks by giving Universal a cut of the Zune sales.

[Snitch @ Oct 12th 2007 12:52PM]

this is a great move by Universal because as much as I love iTunes to look for my album art work and stuff, this also means that sites like Limewire will be flooded with DRM free music to make my iTunes and iPod libraries happy with out me wasting a penny apple should be happy too, because they are not even making that much money on itunes songs anyway, and this move can only make them sell more ipod, the only ones being cheated is the artist here and thats when Universal is the one to blame, no one will subscribe to a music service if a friend is already subscribe to it, the only reason I buy a song is if its not on limewire for free for example

[Jeff @ Oct 12th 2007 1:21PM]

"this also means that sites like Limewire will be flooded with DRM free music to make my iTunes and iPod libraries happy with out me wasting a penny"

So you are going to steal music because this company wont do business the way Apple wants them too? And you people bitch about how MS is a monopoly while you work your asses off to make iTunes one. Let them start their own services and have competition all over.

"... apple should be happy too, because they are not even making that much money on itunes songs anyway,"

So what's the point of iTunes then?


" and this move can only make them sell more ipod"

Okay???? How?

[Keymaker @ Oct 12th 2007 1:53PM]

Dude all am saying if why the heck would i pay for something thats out there for free, its the resposibility of the record labels to protect it, but if they dont give a dam, why should i care, and @ why apple have a iTunes store if the don't make that much money on it, its because every penny counts, and they are also protect music on the same process but again if the record labels leak the stuff on their own its no point in just apple trying to protect it, and why do i think they will sell more ipods? Common sense if your able to put anything being leak out there why not get the best player to play your goodies, bottom line apple its really good at what they do, although I think am going to try out the new Zune 2, but I have to tell you I will be holding tight to my receipt in case apple releases a movie rental service on the up coming mac world because that will definally kill the zune
watching rentals on the go what more can you ask for

[Keymaker @ Oct 12th 2007 1:56PM]

@universal if someone is listening! You can only have a certain amount of songs in your player you know, its not like people really are interested in downloading the entire music industry I only have stuff I like on my player, if nothing new comes out that i like in a year you think am goin to pay a subscription for it? The idea pay as you go sound better to me

[ppcmd @ Oct 12th 2007 1:40PM]

Why should people pay any mfg or music company for the right to use their music player as they choose. Next they will want computers charged a fee because it can play. The music companies may get away with this in Canada but not down here.

[toyotaboy @ Oct 12th 2007 1:39PM]

can universal (Ge owned) be any more delusional? Oh we don't need itunes to sell episodes of the office, and we don't need them to sell our music either... we shall create our own service that everyone will switch to. What they don't get is that people get accustomed to a certain way of acquiring things online, which is why google will always be the number 1 search engine.

[Rob @ Oct 12th 2007 1:40PM]

Why the hell would hardware and cell phone manufacturers want to increase the price of their goods by up to $90 to the sole benefit of Universal [and whoever else they sign up]?

Where exactly is the benefit to those companies? And consumers?

[Aetherion @ Oct 12th 2007 1:53PM]

A few responses to comments above:

For those that think the artist doesn't get paid: that's not how subscription works. It's completely invisible to the user, but in a subscription each time you play a song (on your PC or device), the DRM mechanisms record this and transmit it back to the operator each time you connect to your PC. The artist gets paid-per-play, similar to radio. The price of subscriptions is usually determined by how many plays they think the average person will do in a month.

For those of you who don't like subscriptions: Try it out once. It's not a bad model for music. I won't accept DRM'd and lossy files for music I purchase (I won't buy music on iTunes, etc), but for music you're just renting, DRM and lossy files are OK. You can download all you want, listen as much as you want, and if you lose your PC or you change subscription companies, it's no big deal...just download everything again. You can't say the same for music you've purchased. So for $10/month (less than 1 CD a month), I can have unlimited access to music, with no concern at all for quality or losing data. Similarly, if you've ever rented a movie in your life, then you've already participated in this model and should reconsider it before bashing those that rent music.

[Vanillacide @ Oct 12th 2007 5:34PM]

Movies are things one tends to watch once; hence renting is fine.

Tunes are things ones tends to listen to repeatedly, maybe over a lifetime (I still listen to CDs I bought 20 years ago); hence 'owning' via pay once and play many is more appropriate.

Your example of subscription could be like renting movies if say Blockbuster had a monthly fee that you had to pay, but you could take as many movies as you wanted, and if you didn't take any movies you still had to pay.

The key points you miss about the pricing of the Universal's model and the artists is that monthly price is targetted to be cost of average downloads plus some margin (which is fine, we're all capitalists here) ... but the question is what happens to unused revenue? i.e. if you pay $10/pm but only download one tune, what happens to the balance of the cash? Is that distributed amoungst the artists? Nope. Furthermore, what happens if one artist gets played for more than the average (that the monthly fee is based on), they loss out because they are capped by the average.

This is what Universal are relying on: pay less money to artists, keep more cash for themselves. And in the version of the plan outlined above, get the manufacturers of anything that can play music to collect this 'tax' for them.

[Geoff @ Oct 12th 2007 1:41PM]

Fixing to = Welcome to Texas.

[Jeremy @ Oct 12th 2007 3:11PM]

or Alabama, Mississippi, Georgia, Tennessee, Arkansas...

[DG @ Oct 12th 2007 1:55PM]

Whither spiralfrog.com? I certainly hope not. That site combined with FairUse4WM has been a godsend.

[DG @ Oct 12th 2007 1:55PM]

An additional comment is that this is exactly what Rick Rubin -- new co-head of Sony -- wants to do is well. Do a search of the New York Times for his name and read the profile printed a couple of weeks ago. His grand idea is a major subscription service of media that blankets all of your devices, TV, DAP, stereo, computer, etc. He sees CD distribution as a dying medium (like many), but still sees record companies at the center of music distribution, which seems mostly correct.

For all the talk of eliminating CDs and finding fancy subscription services, I say this: where is my flying car?

[John Doe @ Oct 12th 2007 2:15PM]

To be fair. At $5 a pop I wouldn't mind doing it for a few months so I get higher exposure to new music. Then drop the service for a few months. Then try it again. On, off, on off, etc.
But I'm still going to buy my music. Sorry but I don't want a leash around the neck of the music I listen to.

[jdub @ Oct 12th 2007 3:04PM]

Fixin' to ---- NICE! Its good to know us southerners aren't the only ones to misuse that phrase.

[Scott @ Oct 12th 2007 3:13PM]

The more that various labels and companies separate the music and make users shop around to find the music that they want, the less of it they are going to sell. If downloading music online isn't made to be very easy, it will simply be abandoned for P2P networks... I believe Universal is shooting themselves in the foot if they open their own music service and pull out of iTunes.

[bob e @ Oct 12th 2007 2:46PM]

The demise
of Apple domination
in the MP3 market
is near.

RIP iPod

[dcny @ Oct 12th 2007 3:08PM]

I have a better idea how about a music subscription but you have to have (X) compatable player, then the music for subscription for 5 per month. Downloads to libaray only when player is connected so you cant have more music than can fit on your player.

Then downloads to the libaray and playable on 5 players, then if you would like to burn to a cd , add more players, diff computer, for 45 cents.

and if your hard drive crashed your player will have a list of all music, video, etc from subscription in text format and you can redownload everything for 10 cents or redownload everything in a non drm compatable format mp3's, ogg, aac or wma at 128kps or for 320 kps at 10 cents more

and add other options for 10-20 cents more that could add at to 99 cents real quick if you charge a 10cent differance between formats and 10-20cents between bit rates

[harry wolf @ Oct 12th 2007 3:16PM]

@Keymaker - Yes, I agree and further more, everyone buys and/or gets their music from a multitude of sources - CD's, old tapes recorded and converted to MP3's, Limewire etc., swapping files with friends, going round to someones house with your laptop and buring ALL your friends music from CD's and copying their movies too, etc. etc

Stupid RIAA members seem to think that only one model must work ("there can be only one") - thats wrong - there are and always will be, many ways to get music.

And anyway, subscription models have been rejected again and again by the public.

As for comparing it with renting movies - glad someone brought that up - the Movie biz is doomed to the same fate as the Music biz - like it or not.
Somewhere underneath the average Joe is a burning resentment that some guy got $20 mil for making a movie and now they want $25 and you cant copy it, and all the rest.

But what about the physical copy and the 'artwork'? Yeah, that just reminds you of how much cash you wasted on it...

Perhaps the sheer GREED of massively OVERPAID music and movie types is starting to piss people off?

They say that the only thing that stops the poor from killing the rich is religion - but religion is dying off....

[Rick @ Oct 12th 2007 3:26PM]

When will these labels learn, that it's iTunes that is making the digital download successful.

[harrywolf @ Oct 12th 2007 3:28PM]

RIP iPod? I am FIXIN' to LMAO!

Over 150 million sold and it will be 200 million by the Spring of next year - plus iPhones etc.

Yes, ALL those people are going to throw their iPods in the trash and buy the new DRM, $5 a month. RIAA-approved clunky-shit zune thing, and when the subscription isnt paid the music player explodes and all the music is gone, or when M$ and the RIAA decide its time for a NEW music format/DRM, and it dont work on the 'old' player - you need a new one!

Oh yes, thats REALLY going to happen.
Sign me up for permanent M$/RIAA serf status please, and then beat me with my old iPod cables, while I sign over my bank account to Billy Gates and his new buddies at the RIAA.

[Ethan @ Oct 12th 2007 8:31PM]

I hate subscription, it removes impetus for the labels to put out anything good. They'll just end up like hollywood, where as long as they make things asplode they're happy.

It's like that in music. Crap song? Put some ridiculous synth bass drums on in 4/4 rhythm and tits in the music video. And they're watering it down too - 50 cent's 'ayo technology' used to be pornography, but then got changed, then making no sense.

But it'll never work in Europe, because it's anticompetitive.

[Daniel @ Oct 13th 2007 4:11AM]

I don't quite understand why this would be anti-competitive. Just because it is a subscription system doesn't mean the record companies will all be paid the same regardless of the shit they produce.

Don't you think Sony, being the sensible money-grubbing company that it is, would demand that each company be paid in proportion to the amount of plays its stable of artistes get. And we are talking proportions of the total fees here, not fee per play. It doesn't matter how many times you play it after all, their costs are fixed, what concerns them is whose artistes are the ones who make the subscription more valuable to the customer, the marginal benefit.

And the reason this subscription system is quite a good idea is due to the concept that any kind of copyrighted material always involves no marginal cost, but yields non-zero marginal benefit. By making you pay a flat fee for all the music, you incur no marginal cost for each additional song you decide to listen to. Which is congruent to the way music is produced. Music is produced once and regardless of how many people listens to it, there is no marginal cost.

And in recent times, thanks to bittorrent, the labels have found their products becoming non-excludable as well, on top of being a zero-marginal cost good. Which is why they've realized, eventually they have to treat their product much like a public good, much like street lamps or public roads. Which is why they are trying to get you to pay for it like a tax and not by each consumption. It is a case of trying to exclude free-ridership.

[Peter Sichel @ Oct 17th 2007 12:52PM]

The reason the Record Labels have faired so much worse than Apple over the last few years is that they don't understand their own customers nearly as well as Apple does. It's hard to see how "Total Music" will change that. The gestalt of iPod is to lower the resistance between you and what you want to listen to. iPod + iTunes + iTMS makes it easy to find the music you want and listen to it anywhere anytime. It's about freedom, including freedom from complex convoluted schemes that hide the real costs.

To seriously compete, they would need a family of music players that fill different niches and are all extremely easy to use. They would need iTunes like software that allows users to organize and manage their media collection. They would need an iTMS like store that makes it easy find and buy what you want (without overpaying for stuff you don't want).

Many have tried to compete in one area or another, but no one besides Apple has put all the pieces together. There's no harm in offering alternative ways for people to get their music, but attempting to undermine the success of iPod + iTunes + iTMS would be a mistake. If it were up to me, I'd look for ways to add value to what people already love.